Question

Expected monetary value (emv) is: ?

1) the amount you would lose by not picking the best alternative.
2) the average or expected value of the decision, if you know what would happen ahead of time.
3) the average or expected monetary outcome of a decision if it can be repeated a large number of times.
4) the average or expected value of information if it were completely accurate.

Answer 1

The Expected Monetary Value (EMV) is the expected average outcome of a decision when that decision is exposed to chance and is repeated multiple times. The EMV is calculated by multiplying each outcome by its probability, then summing these values.

Step-by-step explanation:

The Expected Monetary Value (EMV) is the average or expected monetary outcome of a decision if it can be repeated a large number of times. To calculate the EMV, you multiply each possible outcome by its probability and then sum these products. For example, the expected value, or mean, of a discrete random variable predicts the long-term results of a statistical experiment that has been repeated many times, like a game where you have a chance to win or lose money. The expected value helps to determine whether a particular game or decision is advantageous in the long run.

In a mathematical sense, if X is the discrete random variable representing the outcome of a game with associated probabilities P(x), the mean or expected value μ can be calculated as Σ xP(x).